Saturday, May 11, 2024

The Fox-con is dead. Long live Microsoft?

We knew Microsoft was working on a new development in Racine County, but they announced something much bigger than we had heard of this week, and the Prez was happy to fly in for the photo op and do a little compare and contrast with The Former Guy.

Biden joined Microsoft President Brad Smith and Gov. Tony Evers Wednesday at Gateway College's Integrated Manufacturing and Engineering Technology Center to announce the expansion of Microsoft's data server complex, and the tech giant's plans to add about 2,000 permanent jobs over time. The new value of the development is more than three times what was announced a little more than a year ago when Microsoft signed its first deal to buy land in the village's Wisconsin Innovation Park.

Biden said the Microsoft development is a "comeback story," playing out across Wisconsin and the nation, that stands in contrast to the 2017 efforts of Trump and state Republican officials to bring Foxconn to Mount Pleasant. Microsoft is building its data center on land that Foxconn was initially expected to use for a $10 billion LCD manufacturing plant that Trump touted as the "eighth wonder of the world." Neither the investment nor the 13,000 jobs Foxconn promised materialized…..

Biden referenced Trump and Foxconn early in his 20-minute speech before an audience of about 200, using that experience to contrast with the more than 700,000 jobs that he said have been added in Wisconsin under his watch.

That growth, he said, stems from his "Investing in America" initiative, a package of bills passed in late 2021 and early 2022 that aims to encourage investments in domestic manufacturing and infrastructure, accelerate the nation's transition to clean energy, and create new, well-paying jobs.
Even more remarkable was that Fox allowed this fact to break into their BubbleWorld.

I’m generally skeptical when it comes to any of these jobs announcements, especially when it’s under the guise of “check out the number of jobs that are coming to this place in 2-3 years!” And doubly so when it comes to investments in AI, which have all of the characteristics of a Bubble with very little produced that ends up actually improving life for everyday Americans (PR Exec and tech journalist Ed Zitron had a great podcast on this a couple of weeks ago).

But I will say that this seems a lot more legitimate than what this thing was under the old regime.

The Trump/Walker scam had a much hugh level of massive public subsidies and land grabs than anything Microsoft will get. Instead of being gifted the land, Microsoft bought it from the Village of Mount Pleasant for nearly $100 million.

(Quick side note about Foxconn – have we ever found out if they paid the $30 million that they were supposed to pay to the Village of Mount Pleasant this January? I’ve never seen confirmation on this one way or the other, and I could definitely see the local yokels in village government saying “We’re good” now that Microsoft has paid for much of the land originally cleared for Foxconn.)

For the Microsoft development, the biggest form of public assistance will come in the form of a sales tax break for data centers that was part of the 2023-25 state budget (click here to see it, at provision number 13).
Define "qualified data center" to mean one or more buildings or an array of connected buildings owned, leased, or operated by the same business entity (or its affiliate) and for which all of the following apply:

a. the buildings are rehabilitated or constructed to house a group of networked server computers in one physical location or multiple locations in order to centralize the processing, storage, management, retrieval, communication, or dissemination of data and information; and

b. the buildings create a minimum qualified investment in this state of any of the following amounts within five years from the certification date: (i) $150,000,000 for buildings located in a county having a population greater than 100,000; (ii) $100,000,000 for buildings located in a county having a population greater than 50,000 and not more than 100,000; (iii) $50,000,000 for buildings located in a county having a population of not more than 50,000; or (iv) for buildings located in more than one county, the minimum qualified investment provided for the most populous county in which the buildings are located…..

Require WEDC to certify a qualified data center for purposes of the sales and use tax exemption. Require the certification to include a description of the geographic location or locations and buildings of the qualified data center and an identification of the business entity. Require WEDC to contract with that business entity and, upon request, to amend the certification and contract to include one or more additional locations and buildings of the qualified data center. If WEDC certifies a qualified data center for purposes of the sales and use tax exemption and the data center fails to satisfy the minimum qualified investment requirements described above, require WEDC to revoke the certification. All amounts of the sales and use tax exemption claimed under that certification as of the date of revocation become due and payable to each taxing authority against whom the exemption was claimed in the amounts so claimed. WEDC may grant an extension of time within which the qualified data center may avoid revocation by satisfying the applicable qualified investment requirement.
Based on DOR’s estimates related to how many sales taxes get reduced, that’s a write-off of around $130 million if the full $3.3 billion of construction is realized, and a few million a year deducted for every expenses. Still nowhere near what was given away for Foxconn, but it isn’t nothing, either.

You'd think the state rep whose district includes the Microsoft development would be happy about the new jobs and tax base. But instead, he used to occasion to whine like the partisan hack he is.

Napoleon is SALTY!

There also are some education-based assistance and link-ups with other Wisconsin-based organizations that Microsoft will be a part of.
Microsoft's push in southeast Wisconsin isn't only focused on buildings. Smith said it will also make a multimillion-dollar investment in training programs that will teach business and technical leaders how best to adapt AI and transform work culture, support start up businesses, prepare hundreds of students for careers as data center technicians, and provide boot camp-style training for more than 100,000 people who need new skills to work in the artificial intelligence economy.

The effort builds on Microsoft's previous investments in business and workforce development in Wisconsin and brings in many of the same partners, including the University of Wisconsin-Milwaukee's Connected Systems Institute, the Green Bay Packers and the Titletown Tech business development center, the Madison startup accelerator gener8tor, United Way and Gateway Technical College.

To support it, the Wisconsin Economic Development Corp. will provide $500,000 to TitletownTech, the Green Bay-based Packers-Microsoft venture capital and business development partnership. The funds will help TitletownTech set up a Milwaukee office at UWM's Connected Systems Institute, a research and education center focused on advanced industrial processes.

Microsoft also intends to open an AI Co-Innovation Lab lab at the Connected Systems Institute to help Wisconsin manufacturers, entrepreneurs and other business connect with Microsoft AI experts for guidance on implementing AI technology to grow their businesses. WEDC will provide an additional $500,000 to cover capital expenses associated with the initiative.
Yes, I still get wincy when I see businesses trying to run labs at public institutions of higher education (because the business gets a voice in what the colleges and tech schools teach and can take advantage of “free” research). But again, this seems a lot more legit than the pathetic Foxconn PR garbage where they publicly announced plans before the 2018 election to give $100 million to UW-Madison to partner on innovation and research. (The actual amount Foxconn gave? Less than $1 million.

We always knew this was BS.

When it comes to building these items, Microsoft has already spent the money to buy the land (vs being gifted it), appears to mostly be putting in their own funds and investments as part of this, and can tell you what they’re going to do. In fact, Microsoft has its own page here you can track the progress of the project in Mount Pleasant, and the steps that have been taken so far.

That’s a lot more than the empty promises and PR BS that Foxconn would occasionally spit out over the last 7 years, with little actual Foxconn activity that followed the announcements.

But the memory of empty Foxconn “innovation centers” throughout the state and the reality of modern automation got the attention of the Wisconsin Examiner’s Ruth Conniff, who gave a healthy dose of skepticism on what we'd eventually end up with.

In its press release touting the project, Microsoft does not mention a specific number of permanent jobs.....

Standing at the edge of the security perimeter two blocks outside the event, Martin Hying, a Racine resident who said he’s been an I.T. professional since the 1980s, held a sign that said “A datacenter does not create 2,000 local long-term jobs. It might create 20. I know. I run three.”

“You don’t need 2,000 people to maintain a facility like this,” Hying said.

Plus, he added, the higher skilled jobs involved in maintaining the data center’s servers can be done remotely. “They can be anywhere. They can be in Colorado, or they could be in Cambodia or Calcutta, anywhere in the globe.”
I have similar skepticism about 2,000 permanent jobs, given that the tech industry seems hell-bent on stretching as much profit out of as few people as possible these days.

But in the short term, this looks to at least be a real development that'll result in jobs and activity in what has been flattened, empty land for the last 7 years. And it lessens the chances of the Village of Mount Pleasant from going belly-up due to the heavy debts it ran up when it gambled on Foxconn and gave everything away before anything actually happened.

While I'd rather there be no need for subsidies and tax breaks for any job creation, I will say that Microsoft in 2024 seems to be a whole lot of a better deal than the Fox-con of 2017.

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